How to Trade Forex News: An Introduction
How to Trade Forex News – An Introduction
Forex news is a critical factor in the trading of foreign exchange markets. It is important to recognize the different types of news and understand their impact on price movements.
The first thing that you need to know when trading Forex news is that the market reacts based on the forecast of a news release and not on the actual data itself. As a result, it is vital to monitor the economic calendar so that you can identify which of the events being released are most likely to have a significant impact on the underlying asset.
In addition, it is also essential to understand the difference between previous readings and forecasts, as well as the fact that data that is released in the same month can be revised by central banks or governmental authorities at a later date.
Traders who trade Forex news often incorporate these factors into their trading strategy. This can help them to improve their overall performance and increase their profits in the long run.
Trade Periodical News – The most common strategy of Forex news trading involves the analysis of periodic economic releases that are usually published on a regular basis. These are the reports that show the latest developments in a particular country’s economy and their effect on prices.
As a rule, these releases are scheduled and ranked on a scale of significance, with more important ones causing greater volatility in the market. A good way to identify these periods is to look at the Economic calendar of your chosen broker.
Then, it is necessary to analyze the expected effects of the news on the underlying asset you are trading. This can be done using technical tools such as moving averages, pivot points and oscillators.
Incorporate Unexpected Events – Another aspect of Forex news trading is that it allows you to trade events that are not on the economic calendar. These events may include natural disasters, military conflicts and other geopolitical phenomena that are not known in advance. In these cases, you need to analyze the market as soon as possible and find a way to trade the news without risking too much money.
A trader who follows this strategy typically sets deferred orders, such as buy and sell orders, fifteen minutes before a news release. They also set Stop Loss and Take Profit (or Trailing Stop) orders.
Upon the release of the news, traders should wait for the market reaction and close unnecessary orders, aiming to limit their losses. If the price starts to trend, they can add more positions and make a small profit.
This approach can be especially useful for less volatile markets. However, it should be incorporated only when a trader has sufficient experience in the area. The risk involved is high and the profit may not be large enough to compensate for the initial investment.